The Chinese citizen’s ability to move cash from banks, payment processors, or exchanges to Bitcoins is almost nonexistent. Anyone in China that wants to buy Bitcoins must purchase Bitcoin from private dealers. The immediate reaction to this news in the exchanges was a dump of almost all Ecoins. Also angry Chinese Bitcoiners were blamed for a hacking into the Central Bank of China. The value of the most popular Ecoins dropped as much as over 50% in a day or so.

Was this a Government move against Bitcoin?

The Central Bank of China tightly controls the Yuan value against the Dollar. China does not want currency to leave the country uncontrolled. Chinese citizens can not freely export currency out of China. This helps China stabilize the value of Yuan against other currencies. Almost all Yuan currency export happens through the Central Bank of China. When 3rd party payment processors were allowed to do Bitcoin transactions it was easy for Chinese citizens to export Yuan out of the country as Bitcoins. If too much Yuan value escaped the country in Bitcoin, the value of Yuan would decrease against the other global currencies.

Clamping down on Yuan to Bitcoin exchanges closes this loophole in China’s long establish currency control policy. From this perspective, the most recent announcement and regulations referring to Bitcoin are not a unilateral move vs. Bitcoin by the Chinese Government. The Chinese Government previously validated Chinese citizen’s right to buy, sell and trade Bitcoins.

While China continues to control it currency there is a general sentiment that China is opening up its markets and currency at a slow and measured pace. As China’s currency becomes liberalized, so to may its regulations around Bitcoin. It is possible that China’s most recent announcements were more about ‘too much, too fast’ than ‘not now and not ever.’

What does this mean for Bitcoins?

A few days after the most recent announcement, the Chinese exodus appears to more a statement on the health of Ecoins than an early sign of their demise. Things seem to have stabilized with Bitcoin price over $650 from a low of under $500.

Before the Chinese got big on Ecoins, the price was substantially lower than current value. Seemingly, global demand outside of China continues to increase. If this trend continues, Bitcoin could return to its historical highs in due course. Over time it is also possible that China will see Bitcoin as an asset rather than a threat.